All Forum Posts by: Jason E. Smith

Josh, where did you come up with 8% for vacancy, management and repairs? And in your first image you only allocated 5% to vacancy and 5% to repairs (both too light in my opinion) and I don't see any capital allocated to HOA which typically is a major percentage of expenses in any condo. Management contracts will typically have an 8% ongoing fee, but they will have additional fees for finding a new tenant, overseeing large projects and possibly a fee for signing a lease renewal. My experience is over ten years management total fees are typically closer to 12%. I also don't see any capital allocated for CapEx. A brand new class A property you would be hard pressed to have less than 35% operating expenses (not including debt service) over a ten year hold period. B class properties in good areas are going to be closer to 50%. And C/D class properties can quickly exceed 60% operating expenses.

As for people who are buying today and how they are calculating cash flow, the simple answer is they’re not. At least not in a well calculated manner. Right now real estate is the popular asset, along with high tech growth equities, so everyone is trying to win the popularity contest. And they know someone who made a bunch of money in real estate the past five years, the markets been going up for over ten years and so it looks easy. Essentially right now it’s a race to the bottom and we aren’t competing. All of our capital moved into precious metal space in March of 2018 and we’re still confident in that sectors ability to out perform US real estate and US equities over the next two to five years. So I would proceed with caution if you still want to continue purchasing in this real estate bubble. Best of luck!  Jason

Margo, I would recommend Clemmons, Lewisville or Pafftown areas

Sean, safe travels to North Carolina. Can I ask why you’re only considering real estate?  I made the same choice in 2005 and it cost me about ten years. 

Sorry to hear Ravi. Thank you for taking time to let people know. One last option would be small claims court. You represent yourself so it’s cost is minimal. I think where I’m at it covers damages up to either $5k or $10k. I can see a judge having empathy for your situation and awarding money. But even if you didn’t win it would be an inconvenience to Keystone. Best of luck!  

Ji,

Welcome to BP and the wonderful world of Real Estate investing. I recommend reaching out to @Kevin Stringari and the great people at Bottom Line realty. I would recommend being patient and waiting for a more buyer advantageous time because on your first few investments you have a higher probability of making mistakes. Making mistakes when your cost basis is low in a buyers market is less risk than making mistakes today with a sellers market and razor thin margins. Hope that helps! Have a blessed week!

Jason

Sam,

Welcome to BP and real estate investing. I’ll give my free advice to your questions:

1. is the NC real estate market promising ? For the most part, yes. I would be cautious about buying what appears to be deals in small towns that have one or two major employers because in the event those employer(s) leave who will your tenants work for and how far will they have to travel for work.

2. Is it risky/or safe to jump into a duplex as a first property ? Or a SFH would be a best option? Depends on your goals. SF has more buyers if you're wanting to sell down the road, but a duplex offers an offset to expenses when one tenant leaves. So there's pros and cons to each.

3. Where in NC should i start looking for houses under 100k ? Name of city/or Town? Eh, I think you’re making a mistake in focusing on low price. You need to consider who your tenant will be. You may find something for say $90k in a rural location that rents for $700 a month. But that’s a much different tenant that say something that rents for $1,500 a month in a better location. Just think about what life will be like with each tenant in your portfolio.

4. Is it easy to rent the property in NC? Any property will rent, it’s just at what price.

5. Do i need to own an LLC ? No, if you try and buy in an LLC you'll have to use commercial lending which are different terms and conditions.

6. Do i need to hire a PM to handle the property ? Again, depends on your goals. Some people like self managing and they want a dozen or two houses to pay for their retirement. That’s one strategy. Some people want to scale and have hundreds of houses or they don’t want to deal with day to day operations so they use a PM. Me personally, I’ve never self managed, I’ve always allowed professional managers to take care of the properties. I think if you buy a cheap house and you self manager you’ll have a higher risk of creating headaches, but that’s just my opinion.

Ravi, One of the staff in the NC Licensing board for general contractors said to give him an email:  Jason he can contact me via email. ryan cody at nclbgc dot org  (Bigger pockets won't let me post a helpful email address so just exchange the word at for @  Hope that helps Ravi!

Ravi,

Sorry to hear about your challenges, thankfully nobody was injured. I would file a complaint with the North Carolina Licensing board for General Contractors. And I would contact the county inspections office to let them know what happened. They should have been the ones who inspected it and issued a certificate of occupancy. Maybe there’s a defect in the plumbing they aren’t aware of and letting them know might prevent others from having the same challenges. I would also use social media and post your experience in as many places as the builder is found so others know what to expect. As you say, I would assume a lawsuit might cost more than $4k so it may not be worth it. But if many others are having the same issue it might be worth a call to an attorney about a class action lawsuit if many homeowners are having similar issues. Another great option is to call all the local news media. The builder might have a quick change of attitude if his reputation is portrayed all over the local news, he might be quick to help you to save his reputation. Best of luck! Have a great weekend!

Jason

Danielle,

You’ll need a closing attorney to complete the transaction. I would recommend picking your closing attorney and let them draw up the contract.

Jason

@Ethan Griffel , 

I recommend reading the book “Mastering the Market Cycle” by Howard Marks. He entered the investing world back in the 60’s and share’s great insight into market cycles and how to know where we are in the cycle. @Ben Leybovich said it great when he said “When capital is abundant, deals are scarce. And when deals are abundant, capital is scarce.” It’s been my observation that a lot of today’s real estate investors have not been through a market correction, therefore they're still being aggressive because they haven’t faced any consequences of being too aggressive at the wrong time. If you would like to discuss deeper feel free to message me so we don't take away from @Brian Garrett post.  Thank you for the good questions.  Hope everyone has a great weekend!